This series, Selling Your Home Made Easy, is a step-by-step guide that walks you through everything you need to know to sell your home in today’s market. From finding the right real estate agent to preparing for settlement, you’ll be fully equipped.
Just because your home is under contract doesn’t mean it’s time to celebrate quite yet. There are still a few important steps before closing, and if your buyer is using a loan, the appraisal is the next big one. This step can move things forward, or it can put your sale at risk.
The lender must approve the appraised value before they can finalize the loan. If the appraisal comes in lower than the contract price, they will not lend more than what the home is considered to be worth.
That’s why now is the perfect time to understand how this process works.
What Is an Appraisal?
An appraisal is a professional, unbiased opinion of your home’s value. It’s ordered by the lender but paid for by the buyer. The purpose is to ensure that the lender is making a sound investment.
This is very different from a home inspection. An appraiser is not checking for roof leaks or testing your appliances. They are focused strictly on the market value of the property.
If you have a cash buyer, you can skip the appraisal entirely. That’s one reason why cash offers are often appealing.
What Does an Appraiser Look At?
The appraiser will visit your home and compare it to other similar homes that have sold recently in your area. They will take into account current market conditions, supply and demand, days on market, and the features of your home that make it more or less desirable.
Things like a finished basement, upgraded HVAC, or a view can add value. Some upgrades, like landscaping or a new half-bath, may not make as big of an impact as expected.
If you’re selling a condo, the appraiser will focus on recent sales in the same building, and consider how many units are for sale, how many have sold, and the overall health of the condo community.
You or your agent should share a list of updates and improvements with the appraiser to make sure they have all the details. Your agent can coordinate with the lender so that this information gets passed along.
A Note About Appraisal Law
Appraisals are now regulated to be more impartial. The Home Valuation Code of Conduct was created to keep the process fair and to prevent any undue influence. This means that sometimes the appraiser may not be familiar with your specific neighborhood, especially when appraisal management companies are involved.
This can occasionally lead to lower appraisals than expected. When that happens, you still have options.
What Happens If the Appraisal Is Low?
There are a few possible outcomes if the appraisal comes in under the contract price:
- You can lower the purchase price to match the appraised value
- You can lower the price slightly and ask the buyer to cover the difference
- You can stick with the agreed price and let the buyer decide how to proceed
From there, the buyer must decide whether to walk away (and keep their earnest money) or to bring more cash to closing in order to make up the difference.
It’s not always about standing firm on price. In some cases, working with the buyer to make the deal happen is better than putting your home back on the market and risking a lower offer next time.
Your agent will help guide you through this phase to ensure the sale continues to move forward.
Ready to Get Started?
The appraisal is one of the most important steps between contract and closing. If you want to make sure your home is priced right and prepped for success, reach out to me a few months before you plan to sell. We can walk through the process and create a strategy that works for your goals and timeline.
Contact me here, and we’ll schedule a time to talk. My listing calendar fills up quickly, so don’t wait too long to reach out.
Coming Up Next
Next week’s article, Pre-Closing Tasks to Check Off Your List, will give you a helpful checklist to stay on track. You’ll also learn what to expect from the buyers as you get closer to settlement.
I hope you’re enjoying the Selling Your Home Made Easy series. Let me know if you have any questions along the way.
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